The influence of industrial policy and national systems of innovation on emerging economy suppliers’ learning capability

Abstract

This paper links the industrial policy and national systems of innovation literature to the investigation of learning capabilities of suppliers in the context of the automotive parts industry of Pakistan. Drawing data from 50 Pakistani autoparts suppliers, the findings suggest that industrial policy has been helpful in creating a local parts supply base and facilitating the entry of Japanese assemblers in the market. However, the implementation of the policy has been weak, and it is an arduous journey for the local suppliers to develop ambidextrous (exploratory and exploitative) learning capabilities. The findings also indicate that where local training and support from R&D institutions are weak, networking alone with foreign multinationals is not sufficient on its own to develop exploratory learning capabilities of local suppliers. This paper shows the importance of creating national–provincial institutions offering learning and skills development aimed towards innovation.

Keywords:

• Industrial policy
• national systems of innovation
• institutions
• knowledge transfer
• learning capability
• emerging economy
• automotive industry

Acknowledgments

We would like to thank the area editor, Grazia Santangelo, and two anonymous reviewers for their insightful comments that have greatly improved the manuscript.

Notes

¹ The TBS was developed with the following objectives: to make the automotive industry TRIMs-compliant (trade-related investment measures of the WTO); to encourage the indigenisation of parts and components; to discourage roll back through a transparent and predictable system; to preserve and promote developed technologies; to protect the present job structures in the autoindustry; to promote job creation; to protect existing and planned investment by original equipment manufacturers (OEMs) and component suppliers; to promote new investment; and to expand the consumer base in order to benefit from economies of scale.

² The main objectives of the AIDP were as follows: to encourage investment in the automotive industry; to encourage growth; to promote domestic competition; to enhance competitiveness; to stimulate innovation; to encourage local sourcing of components; to facilitate the automotive industry’s integration into the global value chain; to regulate the used vehicles import policy to avoid impeding the growth of the local industry while protecting consumer interests; human resource development through focused and dedicated training institutions training workers for the autosector; promoting close collaborations between already-established institutions such as TUSDEC and TEVTAs; to create an autoindustry skills development company for the development of human resources on a sustainable basis through centres of excellence; and to create a technology acquisition support scheme for local suppliers.

³ The market share of Pak Suzuki has increased by almost 12% over the seven-year period from 2001 to 2008, and it is the market leader in Pakistan – over 60% market share in 2008. Indus Motors, the makers of Toyota vehicles in Pakistan, has seen its market share increase by 7% over the same period. Honda Atlas has the lowest market share of the three and has seen its share decline by around 10% since 2001.